Here you get free CPA-Financial Exam BrainDumps

More documents

Recommendations

Info

Choice "b" is incorrect. Managerial accounting has a future focus, while financial accounting focuses on reporting past results. Choice "c" is incorrect. The emphasis of financial accounting is providing useful information to financial statement users (including the characteristic of relevance), while the emphasis of managerial accounting is providing timely information to management decision makers. Question: 14 Which of the following is a generally accepted accounting principle that illustrates the practice of conservatism during a particular reporting period? A. Capitalization of research and development costs. B. Accrual of a contingency deemed to be reasonably possible. C. Reporting investments with appreciated market values at market value. D. Reporting inventory at the lower of cost or market value. Question: 15 Answer: D Explanation: Choice "d" is correct. The rule of conservatism states that revenues and gains should be recognized when the earnings process is complete, but that expenses and losses should be expensed immediately. Reporting inventory at the lower of cost or market requires the recording of a loss on inventory when market is lower than cost in the period the loss is sustained, rather than when the inventory is sold, consistent with the rule of conservatism. Choice "a" is incorrect. Because the future benefits of R&D costs are questionable, these cost should be expensed immediately, consistent with the rule of conservatism and the matching principle. Choice "b" is incorrect. The rule of conservatism only requires the accrual of "probable" losses. The accrual of a reasonably possible loss is not required and the accrual of any contingent gain, whether probable, reasonably possible, or remote, is prohibited. Choice "c" is incorrect. The reporting of marketable securities with appreciated values at market value requires the recording of a gain on the asset before the gain is realized. This contradicts the rule of conservatism, but is allowed because fair value is a more relevant measure of the value of marketable securities. Arpco, Inc., a for-profit provider of healthcare services, recently purchased two smaller companies and is researching accounting issues arising from the two business combinations. Which of the following accounting pronouncements are the most authoritative? A. AICA Statements of Position. B. AICPA Industry and Audit Guides. C. FASB Statements of Financial Accounting Concepts. D. FASB Statements of Financial Accounting Standards. Answer: D Explanation: Choice "d" is correct. Since Arpco is a for-profit provider of healthcare services, it is covered under
normal GAAP. Thus, the most authoritative pronouncements are the FASB Statements of Financial Accounting Standards (SFAS). Choice "a" is incorrect. AICPA Statements of Position are not the most authoritative pronouncement for almost anything (other than for some issues that only they cover). They are normally "merely" the opinion of the AICPA. Choice "b" is incorrect. AICPA Industry and Audit Guides are not the most authoritative pronouncement for almost anything (other than for some issues that only they cover). Choice "c" is incorrect. FASB Statements of Financial Accounting Concepts are not authoritative pronouncements except where they have been incorporated by reference into an SFAS. They are the basis on which SFAS can be constructed.
Page 1 and 2: AICPA CPA-FINANCIAL CPA Financial A
Page 3 and 4: According to the FASB conceptual fr
Page 5 and 6: A. Allocation. B. Matching. C. Real
Page 7: Explanation: Choice "a" is correct.

Here you get free CPA-Financial Exam BrainDumps

Create successful ePaper yourself

Delete template?

Save as template?